Air Vanuatu in liquidation following fleet issue, poor trading

Vanuatu’s only airline has entered voluntary liquidation after its government ordered a review of the carrier’s operations, disrupting the travel plans of hundreds scheduled to fly between the island nation, Australia and New Zealand over the next week.

Ernst & Young (EY) were appointed liquidators on Friday after the government-owned airline was grounded earlier this week. Air Vanuatu confirmed on Thursday that all flights were cancelled until Monday at the earliest so the company could consider its options.

Air Vanuatu’s single Boeing 737-800 has been out of action since March.

The carrier usually flies from Sydney and Brisbane to Port Villa three times a week. It also flies from Auckland four times each week and once from Noumea.

“The liquidators intend to resume normal trading as soon as possible while considering all opportunities to place the carrier on a stronger footing,” EY said on Friday morning.

Reports the airline was struggling financially began mounting on May 6 following a report in the Vanuatu Daily Post saying it would soon enter voluntary administration.

It’s one of many airlines worldwide struggling to cope with the high costs associated with labour shortages, inflation and other issues linked to COVID-19. Air Vanuatu has also been crippled by disrupted tourism due to cyclones, and it does not have the fleet strength to cope in the event of a mechanical or engineering disruption.

The carrier has a single Boeing 737-800 for international flights and services its domestic network with one turboprop aircraft. Since March, the airline has operated all international routes via its partner, Solomon Airlines, which has two planes. Air Vanuatu’s 737 was supposed to be back in action by the end of last month but remains grounded.

Qantas does not fly to Vanuatu but codeshares with Air Vanuatu instead. A Qantas spokesperson said all Qantas customers with Air Vanuatu bookings scheduled to depart before the end of May should contact its customer service team or their relevant travel agent to discuss getting a refund or a flight credit.

“We will work to book any of these customers who are mid-journey onto alternative flights,” a spokesperson said.

Virgin Australia is the only other airline with direct flights from Brisbane to Port Villa, with four weekly services.

EY Partner Morgan Kelly, overseeing the Air Vanuatu liquidation process, said the airline’s outlook was positive despite the macroeconomic pressures.

“Air Vanuatu is critical to the people of the Republic of Vanuatu and a strategically important business to the nation. Our team is working closely with management to ensure continuity of service to customers and to ensure services continue as seamlessly as possible,” Kelly said.

The first meeting of creditors will be scheduled shortly.

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